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Old 07-14-2015, 06:39 AM
 
7,279 posts, read 8,112,371 times
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The median renter's net worth is ~$5,000. That number has been fairly flat for years.

The median homeowner's net worth is ~$200,000. That number is growing.


Those are just data points. However, they do bolster the notion the homeownership can help homeowner's build wealth over time.
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Old 07-14-2015, 07:47 AM
 
Location: Dallas, TX
2,828 posts, read 3,385,586 times
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Quote:
Originally Posted by EDS_ View Post
The median renter's net worth is ~$5,000. That number has been fairly flat for years.

The median homeowner's net worth is ~$200,000. That number is growing.


Those are just data points. However, they do bolster the notion the homeownership can help homeowner's build wealth over time.
I understand that you state that they are just data points, but I'd like to see the median age of those numbers as well. Renters are usually much younger than homeowners. Out of my group of friends (early to late twenties) I only have a handful of them that actually OWN a house. Most rent a house or apartment. Or live at home.

With that, someone that is 25 is going to more than likely have a significant lower net worth than someone in their 40's or 50's.
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Old 07-14-2015, 08:22 AM
 
485 posts, read 519,907 times
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Quote:
Originally Posted by EDS_ View Post
The median renter's net worth is ~$5,000. That number has been fairly flat for years.

The median homeowner's net worth is ~$200,000. That number is growing.


Those are just data points. However, they do bolster the notion the homeownership can help homeowner's build wealth over time.
It's hard to tell cause or effect from that though. People who are really poor off economically may have no option but to rent. The cohort this forum is interested in ostensibly is a middle class saver. I think there's a lot more evidence than people are acknowledging that renting can be highly advantageous because:

1.) You can rent a smaller place than you can buy, I haven't heard of many 1 bedroom apartments for sale in Dallas. Sometimes buying means having to take on a bigger place
2.) Avoiding closing costs on buying/selling
3.) For people who aren't handy, avoiding repair bills. I know renters still pay for this service, but there are economies of scale. The poor homeowner who doesn't know their way around a toolbox may pay the plumber a minimum of $100 just to show up.
4.) Flexibility. You can change cities to take a higher paying job, or take a job on the far opposite side of the metroplex.
5.) Opportunity cost: If you're a savvy investor, you should be getting about an 8% CAGR on your equity index funds. When you save 20% for a down payment, your money isn't earning anything.

An intangible (and probably huge) benefit of owning though is forced savings. You have to pay the mortgage, but you don't *have* to max out your 401k when renting.
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Old 07-14-2015, 09:14 AM
 
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Timings are a big factor in home buying. If you buy a house when market is at its peak then you loose big time with market crash. If you buy when market is at its bottom then within few years you make good money.

Today's market is too competitive and prices are at or near max for this market. What goes up, it comes down eventually. In 2006 no realtor was telling you about possible 2010 foreclosures, they were saying that prices will skyrocket so you must buy now. Same homes in new subdivisions were advertised for foreclosures and short sales by same realtors within few years.
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Old 07-14-2015, 09:31 AM
 
485 posts, read 519,907 times
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Originally Posted by Austrian2 View Post
Timings are a big factor in home buying. If you buy a house when market is at its peak then you loose big time with market crash. If you buy when market is at its bottom then within few years you make good money.

Today's market is too competitive and prices are at or near max for this market. What goes up, it comes down eventually. In 2006 no realtor was telling you about possible 2010 foreclosures, they were saying that prices will skyrocket so you must buy now. Same homes in new subdivisions were advertised for foreclosures and short sales by same realtors within few years.
While true, I'm not convinced that you can time the market anyway. It's like saying "it's best to buy stocks when they're cheap". Also true, but not actionable. Maybe if you're a quant and you work in or near the industry, but I don't think that just observing that prices are at or above their historical highs is enough to confidently call a bubble. What if the current lending standards end up being a decent equilibrium between being too soft and too hard, the Fed keeps the Fed Funds rate near-zero or low single digits for the next decade, and the US economy keeps growing? Or the government finds new ways to subsidize/encourage home ownership? I think there's too many variables to just expect another crash that you can wait out and buy at the bottom.
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Old 07-14-2015, 09:48 AM
 
7,279 posts, read 8,112,371 times
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Quote:
Originally Posted by bencronin04 View Post
I understand that you state that they are just data points, but I'd like to see the median age of those numbers as well. Renters are usually much younger than homeowners. Out of my group of friends (early to late twenties) I only have a handful of them that actually OWN a house. Most rent a house or apartment. Or live at home.

With that, someone that is 25 is going to more than likely have a significant lower net worth than someone in their 40's or 50's.
Sure. However, there is no way the age gap between renters and owner's explains away more than a fraction of the $195,000 gap.
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Old 07-14-2015, 09:53 AM
 
7,279 posts, read 8,112,371 times
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Quote:
Originally Posted by aggie972 View Post
It's hard to tell cause or effect from that though. People who are really poor off economically may have no option but to rent. The cohort this forum is interested in ostensibly is a middle class saver. I think there's a lot more evidence than people are acknowledging that renting can be highly advantageous because:

1.) You can rent a smaller place than you can buy, I haven't heard of many 1 bedroom apartments for sale in Dallas. Sometimes buying means having to take on a bigger place
2.) Avoiding closing costs on buying/selling
3.) For people who aren't handy, avoiding repair bills. I know renters still pay for this service, but there are economies of scale. The poor homeowner who doesn't know their way around a toolbox may pay the plumber a minimum of $100 just to show up.
4.) Flexibility. You can change cities to take a higher paying job, or take a job on the far opposite side of the metroplex.
5.) Opportunity cost: If you're a savvy investor, you should be getting about an 8% CAGR on your equity index funds. When you save 20% for a down payment, your money isn't earning anything.

An intangible (and probably huge) benefit of owning though is forced savings. You have to pay the mortgage, but you don't *have* to max out your 401k when renting.

I agree with all of that. The kicker being your last point. A mortgage does feature something of a forced savings component.
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Old 07-14-2015, 10:00 AM
 
7,279 posts, read 8,112,371 times
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Quote:
Originally Posted by Austrian2 View Post
Timings are a big factor in home buying. If you buy a house when market is at its peak then you loose big time with market crash. If you buy when market is at its bottom then within few years you make good money.

Today's market is too competitive and prices are at or near max for this market. What goes up, it comes down eventually. In 2006 no realtor was telling you about possible 2010 foreclosures, they were saying that prices will skyrocket so you must buy now. Same homes in new subdivisions were advertised for foreclosures and short sales by same realtors within few years.

Unless there is a serious national recession there is no way Dallas area home values come down over the next several years.............the employment picture is just too good and the area is still a significant home buyer's value leader of most all other large/good economy cities in The US.


I see the recent local price run up as a nothing more than a broad price correction. Prices have been too low here for too long relative to the strength of the local economy and real take home pay.


Today, especially here in Dallas, there is very little low quality home lending going on.
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Old 07-14-2015, 10:31 AM
 
Location: Dallas, TX
2,828 posts, read 3,385,586 times
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Quote:
Originally Posted by EDS_ View Post
Sure. However, there is no way the age gap between renters and owner's explains away more than a fraction of the $195,000 gap.
Oh absolutely not. That goes back to the house and value of it. Older people own houses, thus they have a higher net worth.
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Old 07-14-2015, 10:44 AM
 
216 posts, read 248,795 times
Reputation: 110
Quote:
Originally Posted by aggie972 View Post
It's hard to tell cause or effect from that though. People who are really poor off economically may have no option but to rent. The cohort this forum is interested in ostensibly is a middle class saver. I think there's a lot more evidence than people are acknowledging that renting can be highly advantageous because:

1.) You can rent a smaller place than you can buy, I haven't heard of many 1 bedroom apartments for sale in Dallas. Sometimes buying means having to take on a bigger place
2.) Avoiding closing costs on buying/selling
3.) For people who aren't handy, avoiding repair bills. I know renters still pay for this service, but there are economies of scale. The poor homeowner who doesn't know their way around a toolbox may pay the plumber a minimum of $100 just to show up.
4.) Flexibility. You can change cities to take a higher paying job, or take a job on the far opposite side of the metroplex.
5.) Opportunity cost: If you're a savvy investor, you should be getting about an 8% CAGR on your equity index funds. When you save 20% for a down payment, your money isn't earning anything.

An intangible (and probably huge) benefit of owning though is forced savings. You have to pay the mortgage, but you don't *have* to max out your 401k when renting.

Very nice post.
Great points - flexibility to choose city or smaller place, opportunity cost and forced savings.
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